The European Commission has granted Vodafone, O2 and Everything Everywhere1 competition clearance to implement their proposed mobile wallet and advertising joint venture, known as "Project Oscar".

Project Oscar

In June last year, the three UK mobile network operators (MNOs), mentioned above, announced that they were forming a new joint venture to develop technical standards facilitating mobile payments across their networks and compatible devices.

The MNOs intend to license technology to banks, retailers and other companies enabling customers to pay for goods/services via their mobile phones (so-called "mobile wallets"). Payments will be made either by accessing the mobile internet or by using Near Field Communications (NFC), allowing the user to swipe his/her handset across a special reader.

Under EU merger control rules, Project Oscar required the approval of the Commission. Rather than approving the venture at the earliest opportunity, the Commission chose to open an in-depth "phase two" investigation. These investigations are usually only undertaken when the Commission has serious concerns about the effect on competition of the proposed venture and is considering blocking it in its current form. They often lead to the parties having to give binding undertakings as to their future behaviour to meet the Commission's concerns.

At the time the venture was formally announced and during the Commission’s investigation, a number of parties were vocal in their opposition, citing the market power of the MNOs in the UK mobile retail market and their ability to shut out rival mobile wallet providers.

Alternative Solutions

As well as the mobile wallet market, the Commission also had concerns about the effect that the joint venture would have on data analytics and mobile advertising markets. A key part of the commercial rationale for the joint venture is the ability of the MNOs to sell targeted advertising opportunities to brands and retailers, particularly given the rich amount of data provided by consumers using a mobile wallet service.

To investigate these issues, the Commission invited other players in the relevant markets to answer an in-depth questionnaire. The questionnaire probed the barriers to entry to additional mobile wallets being installed on a mobile device (either through additional NFC wallets being present in the device itself or through an internet-based solution).

Why Did the Commission Not Insist on Undertakings from the Joint Venture Partners?

The Commission found that several alternative mobile payments solutions already exist or are on the horizon, with similar datasets and advertising services already offered to advertisers. It also decided that it would be unlikely that the creation of the joint venture would allow the MNOs to block these alternative services from being made available to their customers as it would not be in their wider interests to do so.

The Commission’s conclusions here may seem somewhat surprising: many mobile payment solutions rely on secure access to the SIM on a user’s handset in order to obtain sensitive data such as bank account details. Such access is therefore in the control of the MNOs. However, alternative solutions already do exist and the Commission was presumably persuaded that the MNOs would risk loosing out commercially if they tried to prevent rival mobile payments solutions from appearing on their networks all together. In any event, any attempt by the MNOs to create a stranglehold over mobile payments systems and to only allow their own service to be sold over their networks would in all likelihood be regarded as an abuse of dominance and so be forbidden by EU competition law.

As regards data analytics and advertising, the Commission’s investigation found that this is already a crowded space with various other players already having access to comparable data to that to which the MNOs would have access. It was therefore unconcerned that the joint venture would have any significant effect on those markets.

Concluding Thoughts

With the end of the Commission’s investigation, the joint venture can go ahead (subject to a challenge - unlikely but theoretically possible - to that Decision by a worried competitor). The battle for control of the mobile wallet has now reached a crucial stage and time will tell just how successful Project Oscar will be and whether the Commission was right to waive it through. No doubt the joint venture’s main detractors will be watching carefully for any signs that it is breaching the competition rules by unreasonably refusing access to its parents’ networks.